With its war-torn economy threatened by further Russian disruptions, Ukraine is in desperate need of a new international financial aid package, economists say, but none appears imminent.
The International Monetary Fund’s $17 billion package in May was not designed to compensate for the effects of months of fighting between Ukraine’s military and Russian-backed separatist forces. In addition to military costs, lost tax revenue and the dire need for infrastructure repair, Ukraine faces a crisis of confidence that is driving capital flight and a decline in its currency.
“I now fear systemic economic failure — unless there is a positive confidence shock,” said Timothy Ash, London-based head of emerging markets research at Standard Bank. He said Ukraine’s banks are fragile, the budget deficit is more than 10 percent of gross domestic product, and the economy could shrink by as much as 10 percent, greater than the current IMF estimates.
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